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IRS special agents warn about fraud during tax season

  • 3 min to read

The deadline to file taxes is right around the corner and Americans have been filing since as early January — but you might want to beware of predators trying to commit fraud.

“You want to make sure you [file] with some caution because those preparers who are out there telling you that they can get you a larger refund, and they’re basing it on some kind of new tax law that most people don’t know about, usually that’s a big red flag for fraud,” said Lisa Sukenic, Internal Revenue Service (IRS) special agent specializing in criminal fraud.

IRS special agents warn about fraud during tax season

Lisa Sukenic and Brian Watson, special agents with the IRS fraud department, are interviewed by NAZ Today's Conor Sweetman in the NAZ Today studio Feb 7. 

Sukenic and Special Agent Brian Watson, also with the IRS’s criminal fraud division, spoke to NAU media Feb. 7 about some of the best practices for tax filing in the United States.

While 55 percent of tax filers choose to hire a return preparer, not all are the professionals one might hope to be paying for. Some preparers might not be as well-versed as others on current tax laws and could land you in trouble down the line. For example, they could award you a higher refund than what you are actually owed, so choose wisely.

But the big scam that the IRS and taxpayers have been butting heads with since 2013 is from IRS imposters over the phone. Watson said that more than $62 million has been lost in this scheme. With about 155 million individual tax filers in the U.S., according to an IRS report, that is 40 cents from every U.S. taxpayer.

Watson said the phone scammers’ tactics are not subtle, but demonstrably effective. They threaten lawsuits, deportation and even imprisonment, preying upon not just the elderly or new immigrants, but also just the average taxpayer, as it has all been proven effective.

“Hang up on these people. That’s not how we do business,”  said Watson. “[The] IRS, we’re very old school in that when we need to talk to you, we send you a letter in the mail explaining the situation. We’re never going to call you up out of the blue and demand money over the phone.”

One of the best ways to sniff out a fraudster is to hang up and directly call the IRS to verify that the alleged agent is legitimate.

The IRS also investigates fraud outside of taxes. Watson spoke about a 2017 case where Mary Bauer, a fundraising consultant in Phoenix, started a scheme with charities as clients. Bauer promised fundraising for charities while collecting various fees in the process despite the donors not actually existing.

“Frauds against charities are far-reaching because they hurt not only the organizations, but the people the charities seek to serve and the persons who have given to support the cause,” said First Assistant U.S. Attorney Elizabeth Strange. “Our office will continue to aggressively prosecute anyone who targets charitable organizations.”

The IRS investigated the Bauer case, and she was sentenced to 33 months in federal prison along with having to pay $1 million in restitution fees.

Some might think the IRS only sees itself as existing to annoy the average taxpayer and keep the money flowing to the top, but even ignoring the fraud cases it goes after, like with Bauer, Watson said the philosophy is not quite so clear cut.

“In some of our cases, the victim is the government where if someone commits a straight tax-evasion case, the victim is the United States government. But in reality, it’s all of us because if someone is not paying their fair share, it leaves more for the rest of us to pick up the tab,” Watson said.

But fraud doesn’t just happen over the phone from a stranger.

Employers have the responsibility to withhold payroll taxes and send them to the U.S. Treasury in the form of a trust. This money comes back to the wage earner in the form of a tax credit and Social Security.

Unfortunately, Sukenic said the IRS is finding a lot of “unscrupulous” employers are not turning over those funds.

“This is devastating. We’re seeing a lot of this,” Sukenic said. “Those are cases that we certainly address, and we will work with all of the victims because in this case, it’s not only the government that’s a victim, but it’s all these employees who had thought that their employer was turning over the funds withheld from their paychecks when, in fact, years later you come to find out from Social Security you’re not getting credit for this.”

Watson said it is a good idea for employees to create an account at ssa.gov and track year-by-year to be sure their employer is reporting withholdings properly.

“There’s definitely willful intent when you see that an employer is obviously withholding these taxes and then filing fraudulent tax returns, spending the money on his own, you know, for his own personal gain,” Sukenic said. “You’ve just got to be cautious.”

And Americans are cautious. According to a 2017 survey done by the data and security insurance company Munich Re, 67 percent of Americans are concerned about tax fraud and identity theft, just over two-thirds.

The IRS often implements new systems for security. With recent data breaches, Social Security numbers may not be the best way to verify a tax filer, so in 2018 new verification numbers might appear on a W-2 as a unique identifier. Watson said in the future all tax filers might even have their own unique numbers and pins as Americans get closer to 100 percent electronic filing.

Despite this, fraud is still rampant.

Tax day is April 17.